How the way older people spend their money could impact future pension rules ...Middle East

Research from academics at the University of Bath and pension consultants LCP found that retirees who owned their own home spent more on luxuries in the first few years of retiring, whilst those who rented from a social landlord tended to have flat spending throughout their retirements.

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The analysis looked at data from between 1968 and 2019 but found that this behaviour was particularly prevalent among recent retirees.

Homeowners currently make up around three-quarters of the pensioner population, according to the report Downhill all the way? What should pension schemes assume about pensioner spending through retirement?

For individuals it means that they need to consider in their financial plans whether they are likely to want to frontload their spending (as most homeowners now do), and that will influence the type of financial products they choose.

Helping pensioners make choices about spending in retirement

Savers are largely left to their own devices as to how they draw on their pension pot through retirement, but legislation shortly to be presented to Parliament will place a legal duty on pension providers to offer a “default” post-retirement journey.

Sir Steve Webb, partner at pension consultants LCP and one of the authors of the report, said: “The starting point for designing post-retirement products should be analysis of what pensioners actually spend.

“The more that providers can find out about their savers, the more the post-retirement journey can be tailored to be a good fit for different groups of pensioners.”

They can take 25 per cent of these pots as a lump sum tax-free and then either draw down from them throughout retirement, or buy an annuity – a regular income.

Dr Ricky Kannabar, senior lecturer at the University of Bath said: “This research underlines the importance of understanding how pensioner spending changes across cohorts.

“In particular, pensioners are not a homogenous group and analysis by housing tenure highlights large differences in the spending levels and behaviour exhibited by each group.

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